Challenging charity solutions to poverty: new business models
By Yitna Tekaligne, country director, Christian Aid Ethiopia
Towards the end of 2016 I visited social enterprises in Kenya with my colleagues Winnie, John and Heidrun. The purpose of our trip was to inform a piece of research we are conducting to identify business models for NGOs (non-governmental organisations) which are appropriate to the changing legal and policy context in Ethiopia.
My first job in the NGO sector began in 1992 and today the world bears little resemblance to the world back then. Today, despite invaluable contributions, NGOs are facing a set of critical and far-reaching challenges. The reduction of foreign aid and over dependence on few donors means NGOs are becoming financially vulnerable. Our legitimacy is in question from all sides: governments, southern partners and donors. For instance, some governments in Africa including Ethiopia, have started questioning the mandate and role of international NGOs, demanding the establishment of national boards, and asking for projects to be implemented directed instead of international NGOs working in partnership with local organizations, as they are seen as little more than money transferring agencies. Major donor groups have also started challenging the role of organisations like Christian Aid that work in partnership, and are beginning to give preference to funding NGOs that directly implement projects on the ground.
Today, there are many strong national NGOs based in the south which meet the standards donors demand in project implementation, monitoring and reporting. Therefore, it is likely that increasing numbers of donors won’t appreciate the need to go through international NGOs as they can directly support local organisations in the south.
Moreover, private businesses are increasingly delivering the services of traditional NGOs for major donors, often underbidding NGO proposals. Donors and government agencies are outsourcing management, administration of knowledge, grants and implementation of projects to specialised private business organisations like KPMG, Deloitte and others.
With these challenges, there is a growing debate and concern about the feasibility of the conventional business model, which relies much on investing tax money from the “global north” into programs in the south through international NGOs.
Cognizant of this unfolding reality, Christian Aid has initiated a process of change with the vision to transform the organisation into a globally networked organisation, thriving in a digital age and able to manage its resources sustainably. This is a true reflection of Christian Aid’s commitment to redefining its role and mandate in the changing global landscape.
Taking into account this reality many development actors have initiated a wave of ‘philanthro-enterprises’ or social enterprises, which offer a new approach and are challenging traditional charity solutions to poverty. These models are gaining momentum, occupying the service delivery space where INGOs once led; the conventional INGO business model seems out-dated and static in comparison. Therefore, it is very important that the on-going change process within Christian Aid should take stock of these new initiatives business models.
In general terms, social enterprises are entities which run business operation with social or environmental objectives. They are registered as charities and companies limited by guarantee, they generate income like other businesses, but instead of profits going to owners and shareholders, profits are reinvested to support the social mission of the organisation.
Here are some examples from our visit in Kenya.
- A new generation of foundations: most prominent are organisations like Farm Concern International (FCI), an Africa-wide Agri-Market Development Agency which focuses on profitable smallholder commercialization, value chain analysis, market access, trade development and private sector alliances for sustainable rural economic growth.
- Technology provider: one example is KickStart International, which is a social enterprise with a mission to lift millions of people in Africa out of poverty. They do this by designing and mass marketing durable yet affordable ‘MoneyMaker’ branded irrigation pumps enabling farmers in sub Saharan Africa to grow enough to start a profitable business selling their surplus crops. Using low cost pumps poor farmers have moved from rain- fed subsistence farming to commercial agriculture generating house hold income.
- Provision of services and knowledge transfer: Tradecare is a social enterprise, registered as limited company, provides services through conducting research and impact studies, design of results-based management and methodology, organising platforms for dialogue, bringing together multiple actors to share knowledge and interventions in the agricultural sector, support to the implementation of projects that have clearly defined outcomes and linking farmers to markets as well as manufacturers to customers.
- Networks which support and promote social enterprises: ANDE- Aspen network of Entrepreneurs (EA Africa chapter) provides different options and funding opportunities including impact investments. The East African Social Enterprise Network (EASEN) promotes social enterprises with members in Kenya, Uganda, Tanzania, Rwanda, South Sudan and Brundi.
Driven by measurable impact, social enterprises are applying for profit-making business models to social, economic and environmental challenges, and are deploying a range of new and highly creative approaches. These and other innovative efforts are changing the parameters NGOs are measured against. Therefore it is high time for NGOs to consider new alternative models when the legal and policy context allows. There is a lot for Christian Aid to learn from and consider as part of our on-going change plan.